Answer:
a) $253,750
b) $6,250
Explanation:
Alpha company purchased shares in Bravo-Zulu company for $250,000
This represents 25% of the equity of Bravo-Zulu company.
In 2017, Bravo-Zulu Company Net Income = $25,000 on November 15, 2017 Bravo-Zulu Company paid cash dividends of $10,000 to its shareholders.
The FY 2017 balances in Alpha Company's account balances are:
a) For investment in Bravo-Zulu
= $250,000 + net income - share in dividend.
= $250,000 + ($25,000 * 25%) - ($10,000 * 25%)
= $250,000 + $6,250 - $2,500
= $253,750
b) For investment income
= $25,000 * 25%
= $6,250
